What would make both the equilibrium interest rate and the equilibrium quantity of loanable funds decrease?
A) The demand for loanable funds shifts right.
B) The demand for loanable funds shifts left.
C) The supply of loanable funds shifts right.
D) The supply of loanable funds shifts left.

Question

Quizplus · Accepted Answer

When the demand for loanable funds shifts left, it means there is less demand for borrowing. This decrease in demand leads to a lower equilibrium interest rate because lenders have to accept lower returns to find borrowers. Simultaneously, the quantity of loanable funds that gets borrowed and lent also decreases because there are fewer borrowers in the market.

What Would Make Both the Equilibrium Interest Rate and the Equilibrium